Read India Right

Ranjan Sreedharan is an independent thinker (and occasional writer) on the economics underlying politics. Not being a professional economist, he believes in evaluating ideas for what they are worth, without waiting for the data (or the macro-economic numbers) to show up. Back in January 2011, he gave a call that India was headed towards an economic crisis and since then has not seen any reason to change his mind.
He works in corporate communications and can be contacted at ranjan.sreedharan@gmail.com

The noted management guru Michael E Porter identifies seven unique competitive advantages for the U.S. economy to explain the country’s pre-eminence, ranging from its environment for entrepreneurship, its institutions of higher learning, its technology and innovation machine, to its commitment to competition and free markets.

In this article, I argue that there is another critical competitive advantage exclusive to the U.S. that arises from its electoral system characterised by consistently low levels of voter turnout in national elections and with disproportionately large numbers of its poorest and least educated citizens not voting. I begin by looking at reasons why the poor in America vote in far lesser proportions than their numbers, in particular, at the various formal and informal impediments that prevent their vote. I then consider the impact this would have had on America’s economy and its competitiveness.

The core idea of this article is that when an electoral process effectively filters out significant sections of the poor, the country would find it far easier to put in place (and sustain) sound free-market economic policies focussed on long term objectives with generous incentives for creation of wealth, and with a tight leash on entitlements. I contend that America’s undeniably greater acceptance of the rigours of the free-market system is not, as is commonly believed, a product of a unique history or culture but, in truth, is closely tied to a discriminatory and exclusionary electoral system (incidentally, with strong historical roots).

1. Introduction

In the article “Why America needs an Economic Strategy” (BusinessWeek, October 30, 2008) Michael E Porter, Professor at Harvard Business School and a leading management thinker, identifies a set of seven unique competitive advantages for the United States to explain this country’s pre-eminence in the global economy. Here is a summary:

The U.S. has an unparalleled environment for entrepreneurship and starting new companies. Second, U.S. entrepreneurship has been fed by a science, technology, and innovation machine that remains the best in the world. Third, the U.S. has the world’s best institutions for higher learning that act as magnets for global talent, while playing a critical role in innovation. Fourth, America has the strongest commitment to competition and free markets. This belief drives the remarkable level of restructuring, renewal, and productivity growth in the U.S. Fifth, the task of forming economic policy and putting it into practice is highly decentralized across states and regions. Sixth, the U.S. has benefited historically from the deepest and most efficient capital markets of any nation, especially for risk capital. Finally, the U.S. continues to enjoy remarkable dynamism and resilience, with a willingness to restructure, take losses, and move on.

There is one more uniquely American competitive advantage that Porter has missed out completely. In fact, I would go so far as to suggest that this is a critical, decisive advantage to be reckoned at the very top (or nearly so) of this list. It has to do with the fact that in American presidential and congressional elections, about half of the electorate never turns out to vote[1].

And the unique competitive advantage arises from the fact that unlike in other Western democracies, the people who end up staying away from voting in the U.S. belong overwhelmingly to the poorest, least educated sections of its society.

Before getting into why this should become a competitive advantage, let us consider the reasons why the poor in America either stay away from voting, or vote in far lesser proportions than their numbers.

2. The impediments

To begin with, in America the rules governing voter-eligibility are determined by state as well as federal laws. Each state has its own laws about who may register and vote. Also, the actual conduct of the presidential and congressional elections is left to the state governments and eligible voters are required to go through a separate registration process prior to the elections. Historically, many of the southern states have had a nasty record of officially and unofficially making it more difficult for blacks and poor whites to register and to vote. The means have varied and have included literacy tests, requirements about ownership of property, complex residency requirements, the grandfather clause[2], poll taxes, and other restrictive and arbitrary registration practices. In fact, it was only with the Voting Rights Act of 1965 that state laws acting as barriers to voting in all federal, state and local elections were mostly overturned. In more recent years, there have been instances of selective purges of voter rolls, and “voter caging”, i.e. challenging voter registrations based on undelivered mail and targeting specific neighbourhoods often by picking on past voting record or a particular demographic profile (see Perez, 2008).

In the U.S., prisoners are not allowed to vote (except in the tiny states of Maine and Vermont). Since the U.S. now has the largest prison population of any country in the world—greater than in China or India, which have between four and five times its population—this is more than two million of disproportionately black, poor and less educated people kept off the voting rolls. Blacks now make up 41 percent of all federal and state prisoners and 17 percent of black men have served time in federal or state prisons in their lifetimes (Burch 2007, p.4)).

Add to this the fact that even after serving their sentences many states continue to make it difficult, if not impossible, for ex-felons to vote. Two states impose a lifetime ban on voting by all ex-felons, even after they have fully completed their sentences, and another eight states either permanently disenfranchise felons or require them to go through a difficult and complicated process to get their voting rights back. With the sharp increase in convictions for crimes, the number of disenfranchised felons in the United States has shot up. More than five million offenders and ex-offenders (about 2.5 percent of the electorate) were excluded from the voting rolls in the 2004 presidential election.

As with the prison population, racial disparities in convictions mean that legal disenfranchisement disproportionately affects black males. Nearly 13 percent of all adult black men nationwide are disenfranchised and with prevailing rates of imprisonment, 3 in 10 black men will likely find themselves disenfranchised at some point in their lives (Lewis 2009, p.5). Furthermore, these laws also mask a more subtle form of discrimination based on wealth and class. Many states require ex-felons to pay all fees, fines, and restitution before restoring their voting rights. This is a burden that falls disproportionately on the poor and amounts to a “modern-day poll tax” (Wood & Trivedi, 2007).

Anthony D Romero, Executive Director of the American Civil Liberties Union, writes, “This nation that prides itself on free and fair elections and voting shuts out more citizens from the democratic process than any other nation in the world. […] While these policies have been in effect for many years, they affect a growing segment of the population, as the United States’ criminal justice system continues to convict and imprison more people than ever before, and now has the world’s highest rate of incarceration (see Ispahani, 2006).

But aren’t felons dangerous criminals who murder and rape and rob people at gunpoint? Well, this is where it gets all the murkier. The reality is that the majority of felony convictions is not for crimes involving violence. For instance, a common felony conviction is for cheque fraud. Another common felony conviction is for the possession of narcotic drugs. Interestingly, among all the narcotic drugs, crack-cocaine (more widespread in black dominated inner city areas) has been singled out for particularly harsh punishment. Crack cocaine and powder cocaine are different forms of the same drug but under U.S. federal laws, distribution of just five grams of crack cocaine attracts a mandatory minimum sentence of five years. However, it takes 500 grams of powder cocaine to trigger the same punishment. In 2006, 82 percent of those sentenced under federal crack cocaine laws were black; only 9 percent were white, despite two-thirds of users being white (see, for instance, Drug Policy Alliance Network, 2007).

There is another angle to this business of felony disenfranchisement. Possibly no other developed country makes it so easy to own or possess a gun as the United States. In most American states, buying a gun requires neither a license nor registration. It is estimated that about a third of households possess a firearm and, in a country of 300 million people, there are nearly 200 million in circulation. The outcome can be perverse. The fact is, where both rich and poor alike have guns, it is unlikely that the well-off person would use his gun to hold-up a convenience store, get mixed up in an armed assault, or use it in the course of a robbery. On the other hand, depending upon how deprived and desperate he is, a poor person with a gun is far more likely to use it for a criminal purpose. And when he does that, he goes to prison on a felony charge and forfeits his vote. When he comes out, he finds either that he is not getting his voting rights back or that it involves procedure so laden with hassles he cannot in fairness be bothered.

Finally, Election Day in the U.S. (always a working Tuesday) is not a national holiday, unlike India or much of Europe where voting takes place on weekends [3]. So, for those holding low-paying jobs where wages are counted by the hour, it actually costs money in terms of lost earnings to go out and vote—often after standing in line for hours. Moreover, it is also fairly common for the poor in America to juggle between two and more low-paying jobs. This means there is even less time to go out and vote. There have also been instances of partisan state government officials, typically in Republican ruled states—Florida in 2000, Ohio in 2004—placing fewer polling booths and voting machines in the poorer districts leading to longer queues and more poor people deterred from voting.

The upshot of it all is that in the U.S., voter turnout among the educated and well-off is always proportionately higher than among the poor. Even during the presidential elections of 2008 when turnout was high by past standards, and which saw extraordinary efforts by the Obama campaign to mobilize poor and minority voters, a CNN exit poll found that only 18 percent of those who turned out to vote, earned an income of less than $30,000 per annum whereas 30 percent of American households belong to this category. In contrast, those who earned more than $100,000 per annum constitute 20 percent of the households but made up 26 percent of all those who voted. From the standpoint of educational background, only 4 percent of those who voted had not completed high school (against a national average of 14 percent) while another 20 percent were just high school graduates (national average of 31 percent). At the other end, fully 45 percent of the voters were either college graduates or had completed post-graduate study, compared to a nationwide average for this category of just 27 percent (refer Appendix A).

This is a picture in stark contrast to India where the poor turn out to vote in droves and the educated middle-class often stays away. It is also very different from Western Europe (and even neighbouring Canada) where voter turnout for national elections is consistently high.

3. The economic advantage

One of the critical factors which determine the economic success of a country is how well it strikes a balance between its short term needs and long term requirements. The short term interests veer towards more spending and consumption, while the long term interests lie in greater investment for the future and in shaping an environment conducive to creation of wealth.

Typically—and this holds for just about any country—the poor and the disadvantaged would tend to have a short term outlook. Their interest would lie in having the government spend more, no matter how the money is raised or not raised, on generous social security and unemployment benefits, health care, public housing, subsidised food and transport, and all the other entitlements that would gratify their immediate needs. They would be less enthused by the investments (and sacrifice) required to advance the economic well-being of the country over the long term, or by the idea of conceding to the entrepreneurial class—the class that creates jobs and satisfies consumer needs—those fair incentives that underpin their efforts.

Why this should be so is not difficult to imagine. The path to prosperity that relies on creation of wealth is a slower (albeit surer) process compared to the immediate satisfaction to be had from its redistribution. However, over a period of time, redistribution unaccompanied by smart ideas to create wealth is also a well documented dead-end.

And yet, it is the short term considerations that hold sway in democracies where the poor vote in large numbers. A good example is India where populism and populist policies have always pulled in the votes with consequences that have not been pretty. In the southern Indian state of Tamil Nadu, the ruling DMK party came to power by actually promising free colour television sets to the poor. In the year 2008, India’s federal government announced (with an eye on impending elections) a massive waiver of loans taken by farmers from commercial banks, with tax-payers picking up the tab. And here is something that happens in practically election after election. India’s power distribution sector is largely in the hands of state governments and the country’s power shortages are crippling. Yet, many states give it away for free, typically to farmers, invariably in fulfilment of a generous campaign promise. The broad economic failure of India’s democracy over most of its six decades of existence has never been much of a mystery.

Unsurprisingly, almost all those countries whose economies were transformed by free-market policies from the sixties onwards (particularly the Asian Tigers) began as autocracies, where such impulses could be actively resisted during the crucial take-off stages of their economies.

4. The big picture consensus

In contrast, America’s overriding economic success (at least until the 2008 meltdown) has much to do with what comes across, or what is best described as, a national consensus. It is a broad concurrence about the big picture that cuts across party lines and is built around old-fashioned virtues like respect for property rights, free trade and free markets, lower taxes, less intrusive government, flexible labour laws, and vitally, a culture that fosters individual responsibility and celebrates individual success. Indeed, it is this consensus that allows employers in America to lay-off workers during a downturn with a minimum of fuss and without running afoul of the political establishment. And, it allows the government the luxury to stand back as firms, big corporations, even entire industries, go belly up when they lose their competitive edge. The economist Joseph Schumpeter called it “creative destruction” and in America, more than anywhere else, it goes on largely unimpeded. Porter (2008) writes: “While the U.S. economy has been a stronger net job creator than most advanced countries, the high level of job churn (restructuring destroys about 30 million jobs per year) makes many Americans fear for their future, their pensions, and their health care. “

In an op-ed column titled “One France is enough” (New York Times, March 4, 2009), Roger Cohen celebrates this facet of America’s strength which he contrasts with France:

Churn is the American way. Companies are born, rise, fall and die. Others come along to replace them. The country’s remarkable capacity for innovation, for reinvention, is tied to its acceptance of failure. Or always has been. Without failure, the culture of risk fades. Without risk, creativity withers. Save the zombies and you arrest the vital.

Arguably, the “American way” Cohen talks about is, to all purposes, an outcome of its national consensus. And even as this American way has been critical to its extraordinary success, the evidence is compelling that it has been kept alive in large measure by keeping its poor away from voting. Putting it simply, if churn is indeed the American way, it surely helps that those who bear the brunt of it—the people actually getting churned—and who have no reason to believe this should be “the American way”, don’t have a say in the process. And, given further that the actual means of denial of voice are a mix of the formal and the insidious, concealed in the fine print of a system otherwise known for its robust defence of liberty, most Americans genuinely believe that the outcome (the American way) is America’s democratic voice. In reality, the system has worked in ways such that those with powerful reasons to protest were being held back at the doorstep.

5. Europe is different

How does Western Europe and Canada compare to America in this regard?

There is no doubt that when it comes to providing a minimum standard of living to its citizens, be it unemployment allowance or health care, Western Europe and Canada stand head and shoulders above the U.S. These policies are the outcome of a European consensus quite different from the American consensus. This consensus emphasises more frequent state intervention in economic matters, typically with extensive laws to protect labour and other vulnerable sections, a comprehensive social security net with socialised health care at its core, and a tax regime with a higher burden on the rich—all in the cause of a more equitable society.

It stands to reason that this alternative consensus could emerge in Europe because the national elections in these countries do not effectively (or insidiously) keep out the poor as they do in America. Churn is not the European way because somewhere along the way, those in the line to be “churned” could raise their voices against it. And because these voices would find an echo in the ballot boxes, the “American way” did not simultaneously become the “European way”. Indeed, it could not even cross the border to become the Canadian way. And so it is that when right-wing political parties come to power in Western Europe, they do so with the implicit promise that the broad status-quo in these matters will not be disturbed. Britain’s National Health Service, so disdained by the right-wing in America, survived the 11 years under Margaret Thatcher.

However, all this is not to suggest that America’s elections are deeply flawed because they deny vote and voice to a large section of its population. Not quite. As I mentioned earlier, the formal disqualifications (felony disenfranchisement) apply to about 2.5 percent of the electorate, while the informal disqualifications are difficult to quantify with precision. The impact can still be significant because elections are often decided by narrow margins of one and two and three percentage points. What is consistently being nullified is the “swing” vote that could or would have tilted the outcome in ways more responsive to the concerns of the poor, perhaps, in favour of a European-style welfare state.

In the controversial, closely contested presidential elections of 2000, Florida’s disenfranchisement laws barred over 600,000 non-incarcerated citizens from voting. And George Bush carried the state (and the Presidency) by 537 votes. Anyone acquainted with the workings of the American federal government would know that when it comes to enacting social and economic policies and (more importantly) when it comes to laying out the money to further those policies, the U.S. Congress wields so much power as to be in a league of its own. And yet, when it comes to voter turnout in the biennial Congressional elections, the picture is bleaker than even its presidential counterpart, averaging just about 45 percent over the post-war years.

Evidently, the turnout levels in the Congressional elections suggest even more of the poorer voters staying away than in the presidential elections. Partially, this would be a consequence of greater levels of apathy among the poor for long resigned to not getting any immediate gratifications out of the electoral process. But apathy alone cannot be a sufficient explanation, particularly when similarly placed voters in Canada or Western Europe show no such tendencies. Surely then, it is also a pointer to the existence (and effectiveness) of all those formal and informal barriers to voting by the poor discussed earlier in this article.

In election after election, a crucial swing vote—which, by definition, can swing only one way—is being systematically taken out of the equation. And, arguably, this denial of say has been critical to sustaining that American consensus about the American way which lies at the very heart of the country’s extraordinary economic success. Unlike the Asian tiger economies that found it necessary (and convenient) to suppress the democratic process in order to get their economies going, America could manage similar economic results without discarding its democracy. It could do so because its electoral process, with its dependence on state governments to conduct national elections, is for all practical purposes underpinned by a subtle framework of barriers to voting by its poorest. These barriers serve to filter out a sizable section of the voices inclined towards immediate satisfactions over long term achievements and priorities.

And so, even as the method remained recognizably democratic, the outcome was more Asian Tiger like. And this paradox is at the heart of America’s extraordinary economic success.

6. What next?

Looking ahead, in the years to come, the ranks of America’s voters will be swelled by more and more poor immigrants from Latin America. In the 2008 elections, red states like Colorado and New Mexico, where there’s been an influx of Hispanic immigrants, went to the Democrats. Texas has more Electoral College votes than any other state except California. It is now reliably Republican but already its immigrant population has reached the 20 percent mark and it may not be long before even this state flips (see Camarota, 2007).

In an op-ed column titled “The Rage is not about Health Care” (New York Times, 27 March 2010) Frank Rich observes:

Demographics are avatars of a change bigger than any bill contemplated by Obama or Congress. The week before the health care vote, The [New York] Times reported that births to Asian, black and Hispanic women accounted for 48 percent of all births in America in the 12 months ending in July 2008. By 2012, the next presidential election year, non-Hispanic white births will be in the minority. The Tea Party movement is virtually all white. The Republicans haven’t had a single African-American in the Senate or the House since 2003 and have had only three in total since 1935. Their anxieties about a rapidly changing America are well-grounded.

We can also expect increased grass-roots organisation by the Democratic Party and activism by liberal NGOs on the lines of ACORN[4] to encourage greater registration and turnout of poor voters. It is also significant that some states have begun to rethink the terms of their disenfranchisement laws. For instance, since 2005, Iowa has been automatically restoring the voting rights of ex-felons. In April 2007, Florida changed its laws and now selectively permits some of them to vote. More than 130,000 Floridians have had their voting rights restored since then. Also, many states now allow early voting where voters can cast their ballots well ahead of Election Day and more to their convenience. This should also help those holding low-paying jobs (where wages are paid by the hour) who can now vote on their off days.

Put it all together, and this is what I believe will be the likely picture. From now on, America will increasingly swing towards the Democratic Party with higher levels of tolerance for populist economic policies. The Republican revolution that began with Ronald Reagan in 1980 looks like it may have ended for now. A party identified with patrician interests could succeed, and brilliantly at that, because they were able to co-opt a good chunk of white working class votes. They did this by appealing to religion, to the inherent social conservatism of this class, and to its latent racism. Arguably, the high point of this strategy was the election of George H.W. Bush in 1988—recall Willie Horton[5], a black murderer and rapist whose dark, menacing photograph featured prominently in his campaign. The re-election to the presidency of his son George W. Bush in 2004 (after Iraq stood revealed as a shambles), thanks to an energised base of social conservatives turning out in unprecedented numbers, was yet another vindication. The strategy fell apart in the 2008 elections because America’s economy fell apart, bringing to the fore an entirely different set of worries. When your job and your home are at stake, maybe what you strongly believe about abortion being another name for murder can wait.

The Hispanic vote is now a key constituency in many American states, and this is only going to increase what with one million immigrants becoming American citizens every year. Add to this the likelihood of poorer voters turning out in larger numbers (at least in the presidential elections), and the Republican Party may well be staring at a tectonic shift in voter preferences away from them.

America, therefore, appears headed towards an age where the default status, in reference to the party affiliation of its president, will be Democrat. This is not to suggest that a Republican will not become president any time soon. Only that in the years ahead a conservative Republican president will likely be the exception, getting a look-in when the default becomes a muddle or vexes the voters, otherwise not.

It is a future where America becomes fairer and more equitable, like Europe, but also less dynamic, not so fiercely competitive, with more modest achievements to its credit, like Europe.

Author’s Note: This article is largely unchanged from the version posted on 15 April 2010 (as a working paper in Economics) on the website of RePEc (read here). It’s possible that some facts and figures quoted here may be outdated.

In the next part I’ll consider three related issues:

Why America’s economic performance in the post-war years has been far more exceptional than conventional wisdom on this matter recognises it to be

The immigration paradox: America’s relative openness to immigration is widely considered to be a success. However, from now on, the immigrant population will likely be a drag on the economy simply because there are economic consequences to the predictability of their voting patterns. Indeed, I foresee a future where America drifts away from its economic “exceptionalism” towards a garden-variety, me-too Europeanism.

The Post-democracy: What legitimate changes can be made to America’s electoral system to ensure that economic populism is kept at bay?

Endnotes

[1] In the two latest U.S. Presidential elections (i.e. 2004 and 2008), turnout as a percentage of voting age population was higher than usual at about 58%. However, in the biennial congressional elections, it regularly dips below 40%. Full details (including historical data) about turnout figures are available at the International Institute for Democracy and Electoral Assistance (IDEA) website at: http://www.idea.int/vt/country_view.cfm?CountryCode=US

[2] In the aftermath of the American Civil War, when southern states were actively disenfranchising their black population (as well as the poor whites who had immigrated from the northern states) through the literacy test, the “Grandfather Clause” was a provision to allow voting rights to the illiterate local born whites, who only had to prove that their grandfathers had enjoyed this right.

[3] In Austria, Belgium, France, Germany, Greece, Italy, Spain, Sweden and Switzerland, voting takes place on the weekend holidays, as also in Australia and New Zealand. In Canada, where voting takes place on Mondays, employees are entitled by law to a three hour break.

[4]ACORN (Association of Community Organizations for Reform Now), is an NGO that advocates for poor families by working on social issues like neighbourhood safety, health care, affordable housing etc (Wikipedia). In the run-up to the 2008 elections, it was active in promoting registration of poor and minority voters and its methods came under fire from Republicans who accused it of encouraging voter fraud. On March 22, 2010, ACORN announced it was disbanding due to falling revenue.

[5] Willie Horton was serving a life term for murder in the state of Massachusetts. When Michael Dukakis, the Democratic nominee for president in the 1988 elections, was governor of Massachusetts, Horton was permitted (under the terms of a programme begun prior to Dukakis but supported by him) to go out of prison on a weekend furlough. He did not return and was later arrested in Maryland state after he had raped a white woman.

Bibliography

Burch, Traci (2007) A Study of Felon and Misdemeanant Voter Participation in North Carolina. The Sentencing Project, Washington D.C. pp.4,7

Note 2: A comparison of the income distribution of voters with the general population (as in the first table above) may not be entirely accurate as the percentage of those below 18 years (and not eligible to vote) would differ in each category. Therefore, a more accurate comparison would be the income distribution as a percentage of the voting age population, for which data was not readily available.

I agree to your premise – the US governments so far had a relatively free hand since they did not have to cater to poor votes, unlike say Europe or India. This was quite insightful.

I also completely agree that the Obama Democrats is a new coalition of young kids, african-americans, hispanic voters and it’s mathematics that won him more than anything else.

But in this election and last election you missed one point. The Women vote, that is 54% in size is decisively Democrat by character. How do you explain that Obama has a double digit advantage in that group?

Mind you, these are not bra-burning left-lib feminists.. (although they may be a subset of that vote bank). It includes my wife who is far from being those cry-hoarse feminists. She’s a relatively traditional, conservative woman.

The simple point is, the current Republican party is dominated by the Rush Limbaugs and Michele Bachmanns. These crazy nuts, are not fringe anymore. They *are* the party now.

You will be surprised – but I started as a Republican 14 yrs back. Today, I can’t think of being on their side. The point is, till most GOP lovers are in denial of this fact that Extremism has taken a firm root in GOP, the Democrats will win by default. You may be aware that GOP lost their most safest senate seat in Mississippi, thanks a loony nut. (And to be fair their are super nuts on left too. But they are on fringe)

Next elections, when I stand in line for voting, I hope I have a Republican candidate who I can respect both on Economics and Social ideas. I am a social liberal (open to gay-marriage, stem-cell research etc) and fiscal conservative (deficite is a huge no-no, and do not like unionism). I endorse a lot of Republican ideas. But what we see in current form is an extremely negative party with very extreme leaders. They almost brought the nation to the brink because of adamant congress that wanted a one term presidency for Obama.

Point is, the GOP needs to shift to center. They will find a lot of friends. Including in Hispanic community. If they continue to go on this road, their appeal will be limited to the bible belt in south.